Sirius Minerals(LSE: SXX) has announced a placing todaywith the intention of raising approximately 15m. The placingis being conducted by way of an accelerated bookbuilding process to qualifying investors, and should have been completed by 10am this morning.
Sirius intends to use the proceeds from the placing to strengthen its balance sheet and provide additional working capital for the group. Or in other words, the company is running out of cash.
And it looks as if Sirius is conducting this fund raising now, before the companyreceives the initial outcome of itsplanning application for its flagship potash project near York, which is expected in May.
A warning
Sirius warnedalongside its interim results in November that the company only had enough cash to operate for 12 months. Sirius had a cash balance of just under 28m at the end of September, the last period for which data is available. But sixmonths later, and according to todays press release, Sirius cash balance has fallen to only 12m, indicating a cash burn rate of just under 2.7m per month.
Even with the extra 15m from todays placing, if Sirius does not receive planning approval soon for its York potash project then, according to my figures, the company will only have enough cash to keep the lights on until the end of the year, assuming a cash burn rate of 2.7m per month.
Approval needed
Still, according to Sirius management the company should have received some sort of planning decisionby May. This should alleviate pressure on the company. Unfortunately, the decision has already been pushed back by the planners once this year, and theres no guarantee that a decision will actually be published by May.
So, Sirius investors are now facing yet more uncertainty. True, todays placing will give the company enough cash to stay in business until the end of the year. Althoughif Sirius doesnt get the planning permissions it requires within the next few months, its unclear how the company will survive past December.
In addition, even if the plans for the York potash mine are approved, Sirius will have to find funding to build the mine, which is likely to be an uphill struggle.
Time is running out
Overall,time is running out for Sirius and the company is no longer the blue-sky opportunity that it once was.
However, here at the Motley Fool we’re always on the lookout for blue-sky hidden gems.And while searching for the market’s next multi-bagger, our analysts have recently identified a stockthat could driveathree-fold increase in salesin just5 years.
Unlike Sirius, which is rapidly running out of time, the company our analysts have recently uncovered is already profitable. What’s more, this undiscovered gem has a proven advantage over its peers.
To find out more, download the team’s newFREEreport, “3 Hidden Factors Behind This Daring E-commerce Play“. This issomethingyou do not want to miss and we’re offering you the chance to find out more for free right now — justclick here.
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.